Relationship between inflation rate, unemployment and GDP

GDP

The best way to understand the country’s economy is by looking at Gross Domestic Product (GDP) which is the statistic used to calculate all of a nation's total income and output for a year. The advantage and disadvantage of using GDP is that

It is used to measure the economy is growing more quickly or more slowly than before or the same as pass year.

It can use to compare the size of economy with other country

It can also use to compare the growth rate of economies across the countries.

On the other hand, it doesn’t include black market or domestic household products.

It cannot use to measure the standard of living in country.

Real GDP ( PPP)

Billion $

Singapore

Taiwan

South Korea

Hong Kong

China

2005

186.647

592.234

1096.741

243.081

5314.372

2006

208.823

640.874

1191.112

268.618

6124.36

2007

231.484

696.822

1287.775

293.939

7119.439

2008

239.146

712.117

1344.535

307.318

7926.498

2009

234.793

693.345

1352.023

300.804

8734.705

Source: CIA World Fact book, International Monetary Fund and UN data

From above graph, china’s economic was risen dramatically almost to 8.7% from 2005 to 2009 but the GDP rate for other country was increase slightly. Where did china’s GDP growth come from? The reason is that it is come from investment and consumption. According to the Singapore china new Asia channel, in 2009 the investment of china growth rate was US329.64 million almost 3.5 times growth rate of GDP.

GDP per capita

GDP per capita refers to the Gross domestic product per person.GDP per capital calculate investment, government expense, personal consumption and exports that a country makes.

GDP per capital is very useful because that can indicate the standard living of individual members. Then, GDP per capital’s figure signifies national economic. As GDP per capital can specific indicate whether the standard of living is improving or not so economic planners and forecasters usually used the GDP per capital to monitor economics trend in order to increase their living standard of the population

GDP Per Capital (PPP)

Dollar $

Singapore

Taiwan

South Korea

Hong Kong

China

2005

43754.285

26008.96

22783.228

35549.524

4064.342

2006

47444.566

28014.488

24662.133

38876.605

4659.15

2007

50447.619

30351.546

26575.975

42276.392

5389.218

2008

51226.033

30911.83

27691.944

43846.889

5970.288

2009

49433.483

29828.502

27790.6

42573.882

6546.304

Source: CIA World Fact book, International Monetary Fund and UN data

As we can see singapore and Hong Kong was the highest GDP per capital among countries.Correspondingly,the parcentage of GDP per capital grow rate is 2 to 3% for both country from 2005 to 2008.On the other hand, in 2009 the capital rate for Singapore,Taiwan and Hong Kong was slight reducation average -3.50 % except china. The reason is that china decrease and remain their national population and their currency rate to keep their GDP capital to grow up. The capital rate for South Korea was increased slightly almost

.Unemployment

Unemployment can describes worker who is willing and able to take work but can’t find it. Usually, unemployment is caused by economy slow down or unemployment can also caused by advance technology such as machines, robots or computer that will replace the worker.

Unemployment is very important for government to estimate the health of the economy because this will automatically affect national economic.

Unemployment

Rate

Singapore

Taiwan

South Korea

Hong Kong

China

2005

3.4 %

4.5 %

3.6 %

6.7 %

9.8 %

2006

3.1 %

4.1 %

3.7 %

5.5 %

9 %

2007

3.1 %

3.9 %

3.3 %

4.9 %

4.2 %

2008

2.1 %

3.9 %

3.3 %

4 %

4 %

2009

2.2 %

4.1 %

3.2 %

4.1 %

4 %

Source: CIA World Fact book, International Monetary Fund and UN data

From 2005 to 2009 South Korea, Hong Kong and Singapore’s unemployment rate was decline significantly especially china and Hong Kong that was almost 4.76%.The fact was china and Hong Kong has created a system for graduates to set-up their own business and 20% income tax refund.

Inflation rate

Inflation rate refers to overall increase from an original price level of good and service in an economy. The increasing of inflation rate will affect the economy. As the cost of service and good increase, this will cause the value of dollar going down because people will not able to purchase more as previously.

Inflation Rate

Singapore

Taiwan

South Korea

Hong Kong

China

2005

1.7 %

1.7 %

3.6 %

-0.3 %

4.1 %

2006

0.4 %

2.3 %

2.8 %

0.9 %

1.8 %

2007

1 %

1 %

2.2 %

2.2 %

1.5 %

2008

2.1 %

1.8 %

2.5 %

2 %

4.8 %

2009

6.5 %

3.5 %

4.7 %

4.3 %

5.9 %

Source: CIA World Fact book, International Monetary Fund and UN data

Inflation rate was affected by global finance crisis in 2005 to 2008 so the inflation rate was noticeable difference. After recovering their business, the inflation rate was rise dramatically almost 3% in 2009. The true cause is that when inflation rate increase, global demand for other manufacture good was decrease.

Summary

Overall, every country concentrates on the relationship between inflation rate, unemployment, GDP and GDP per capital that are essential for economy to grow. Correspondingly, if GDP is falling annually, it will cause business failures and thereby increase unemployment. In addition, high unemployment will reduce the national income and negative effect on GDP per capital and inflation rate.

Conclusion

In today economy every countries has suffered global financial crisis hence, economic planners and forecasters can learn from past financial crisis to become more stronger and more strategy to face that again such as how to remain or increase their GDP ,unemployment rate or inflation. In the future we won’t know when will we face financial crisis again but real GDP, real GDP per capital, unemployment Rate and inflation rate are playing important part in financial crisis.